In today's commercial environment, payment cards—such as credit and debit cards—are ubiquitous methods of payment. These payment cards are issued by individual card companies or are issued by financial institutions that are members of a payment association (such as MasterCard® International Incorporated). As used in this application, the term “payment card” includes not only physical payment cards in which the payment account information is stored on a physical card, but also virtual payment cards in which the payment account information is stored in digital or electronic form.
A problem with conventional payment cards has been in using them for making small payments, also called “micropayments.” The level below which a payment is considered a micropayment varies depending on the circumstance. A typical range for the threshold level for micropayments, however, is about $4 to $25.
Card issuers generally do not like cardholders to make micropayments on conventional payment cards because such transactions are not cost-effective for them. Of particular concern are the costs associated with micropayment repudiations, which are the costs incurred when a cardholder disputes a micropayment on a statement. Such costs include processing costs, costs associated with customer call centers facilities and equipment, and salaries for customer service representatives. To a lesser extent, the statement costs for separately itemizing micropayments on a statement are also a concern.
As an alternative to conventional payment cards, several different micropayment schemes have been suggested. By way of example, some schemes have introduced the concept of digital currency or tokens, which consumers would pay for using conventional payment methods and load in a digital wallet. Other schemes rely on aggregation, in which the micropayments are aggregated periodically by a micropayment provider and the aggregated amount is then charged to a payment card account.
One of the biggest obstacles with the existing micropayment schemes is that each scheme requires a merchant to install a micropayment provider's proprietary technology. Lacking widespread support in the marketplace for any one particular scheme, consumers are then required to register and open multiple accounts with multiple micropayment providers to purchase content from different merchants. This is obviously very inconvenient to consumers.
Therefore, there exists a need for a micropayment scheme that will work with conventional payment cards and that could be implemented by all merchants that accept conventional payment cards with little or no changes to their existing systems, while at the same time addressing the economic concerns of card issuers.